General Motors’ share of profits from its China joint ventures nearly quadrupled to $US162 million in the first quarter, while its losses from Korea’s GM Daewoo narrowed, the giant carmaker has said. According to Reuters, GM’s earnings in China, the fastest-growing automotive market in the world, rose from $US44 million in the first quarter last year, according to a US securities filing.
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GM, which is continuing to ramp up production in China, in January played down expectations of rapidly growing earnings there this year due to downward pressures on pricing and a shift to sales of more low-margin small cars, the report noted. Meanwhile, Reuters added, GM’s share of its losses in Korean automaker GM Daewoo fell to $US8 million in the first quarter, from $12 million in the year-ago quarter. GM has a 44.6% stake in GM Daewoo, which was formed in 2002 after GM and several partners bought some of the assets of former automaker Daewoo Motors. The report said sales by GM Daewoo have grown as it has broadened its range and sold cars through GM brands such as Chevrolet around the world. GM Daewoo officials reportedly have said that they expect sales to double over the next three years. GM’s profits from Asia-Pacific have grown to such a sizable portion of total earnings that the company decided to include more detailed results for the region in its quarterly earnings reports, a spokesman told the news agency. MONEY-MAKER Reuters noted that many analysts criticised GM’s moves into China and Korea, but the region has become a critical profit centre for the camaker whose earnings from North America have fallen due to higher incentives and increasing competition while its European unit has been mired in losses for years. In January, GM reportedly said it expected Asia-Pacific earnings to grow to a range of $700 million to $800 million this year, up from $577 million last year. In the first quarter alone, GM earned $275 million from the region, mostly from China, the report said. Reuters added that GM and its main Chinese partner, Shanghai Automotive Industry Corp. (SAIC), have embarked on an ambitious expansion plan in China, working to revive a money-losing venture in northeast China, and, in March, both agreed to buy an idled engine plant in China that was formerly run by the defunct Daewoo Motors. Last year, GM reportedly said it would raise capacity by 50% in China to 766,000 units, adding production lines to its main Shanghai plant and another in the southern region of Guangxi. Reuters noted that such capacity building has sparked worries about oversupply and a margin-eroding price war in the future – one reason why [the government in] Beijing is trying to apply the brakes on reckless capital investment in booming sectors. Car sales in China, which doubled to around two million units in 2003, are expected to grow just 30-40% this year, the report added.
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